Accent on the future

Global consultancy carves out niche in China's Business Process outsourcing space

Like many of her peers, Samantha Zhu is also amazed by the remarkable strides that the outsourcing industry has taken in China.

"It is fascinating how the industry has grown and serves customers in diverse regions like Europe, the US, Japan and Australia. China, to me, is like a teenager bubbling with loads of energy," says Zhu, the vice-president of the BPO practice for global consultancy Accenture in China.

Zhu, one of the pioneers in the business process outsourcing field in China, says things were not that easy in 2002 when the whole BPO concept was still seen as something that was "novel" and "innovative".

"Over the years, I would say it has been a fascinating journey. We have been able to help clients from other countries and regions with their business processes much like what New York Times columnist Thomas Friedman described in his book The World is Flat," says Zhu.

"Curiosity prompted me to change my career, from consulting to outsourcing."

Zhu was a member of the core team that helped Accenture set up the BPO center in Shanghai in 2002 to provide outsourcing services for some global companies.

"Developing the outsourcing business in China was a challenging task as there were no set templates that we could follow. The very idea that companies would be willing to outsource part of their businesses to third-party service providers itself was novel to most of us," she says.

Zhu says she herself did not understand the meaning of the word outsourcing when she heard it for the first time. To shape up for the task ahead, Zhu and her Chinese colleagues underwent some training courses and then got on to co-designing the outsourcing processes. After setting up the offices, the team had to train the service delivery team. "It was a hard and fulfilling period, as we were not only working, but also learning."

Accenture's BPO journey in China more or less represents the story of the industry in China, Zhu says, adding, "starting small, it has grown very fast".

Accenture has more than 146,000 employees worldwide for providing outsourcing services. Of this, nearly 44,500 work in the BPO sector, providing outsourcing services to more than 400 clients across 150 countries.

The company achieved annual revenues of $25.5 billion (21 billion euros) last year, a year-on-year growth of 15 percent. The BPO practice was an integral part of this success, Zhu says. In China, Accenture has posted double-digit growth rates consistently in the BPO market, a trend it expects to sustain in the long run.

"The BPO industry in China is just 10 years old. It has been developing at a rapid pace and could well be the growth engine of tomorrow, backed by the abundant talent pool, huge domestic demand and strong government support."

To further capitalize on its gains in China, Accenture is now looking to move onto the next growth phase by expanding into smaller Chinese cities and coming out with products that cater to customers' needs for end-to-end solutions, Zhu says.

"Cutting labor costs is not the right prescription for outsourcing companies. The real competition will eventually come down to business models, talent, technologies and the values that companies can deliver to clients," she says.

"During our studies we found that most of the customers want outsourcing partners who can provide end-to-end services. In other words they want companies who can provide one-stop solutions," Zhu says.

Accenture, for its part, provides a wide range of BPO services, including back-office services such as finance and accounting, procurement, human resources, supply chain, as well as services geared to the needs of specific industries such as utilities, insurance and healthcare.

"New technologies and applications such as cloud computing and mobility technology are becoming vital for businesses. We will develop new outsourcing offerings to catch up with the latest trends," Zhu says.

Though China's cost advantage over developed countries is disappearing gradually, Zhu says Accenture will remain committed to China.

The company currently has outsourcing centers in Shanghai, Beijing, Dalian, Guangzhou and Chengdu.

At the same time, Zhu says Accenture also faces some challenges in the Chinese outsourcing market. "The Chinese outsourcing market is less mature from both supply and demand perspectives. Talent shortage is a common issue across different outsourcing offerings," she says.

"Many multinational companies are keen about data privacy and information security for the outsourced services they receive. Many local Chinese and State-owned enterprises haven't yet had the mindset and appetite for outsourcing services on a large scale.

"Given that outsourcing is a big change initiative to an enterprise, change management effort is also a great consideration for many companies before they decide to outsource," Zhu says.

Analysts say that the increasing pie of the Chinese outsourcing market will provide opportunities for both foreign and domestic outsourcing companies.

"China's outsourcing market is big enough to foster differentiation. The demand for outsourcing services cannot be fulfilled by global and offshore centric companies alone. It is a huge opportunity for Chinese service providers," says Ning Wright, the partner in charge of shared services and outsourcing advisory at global consultancy KPMG.

According to a report released by KPMG in June, a growing number of foreign companies are now partnering domestic service providers.

"Chinese service providers are relatively small in size, unlike the major global and offshore-centric vendors. But they are growing at a faster pace and more focused on building capabilities for higher value BPO services. Both Chinese outsourcing service providers and foreign companies can learn from each other and gain profits from this market," Wright says.

Joan Mao, an analyst with International Data Center, says foreign outsourcing service providers and domestic players have their respective advantages.

"Generally speaking, foreign companies are more experienced in providing some high-end services, such as consulting. But China's outsourcing service providers are more familiar with the needs of the Chinese market, and hence can provide more tailored products for Chinese clients," Mao says.

huhaiyan@chinadaily.com.cn

(China Daily 07/27/2012 page5)